project. yet, even with an exhaustive review process, the consent now of every state along the route, the backing of a majority of congress, and the support of the american people, the keystone x.l. pipeline project is still languishing at the hands of the president of the united states, after four and a half years. let me expand on the point about all of the states on the route approving the project. after governor heineman on the state of nebraska sent a letter to the president approving the project, which happened several weeks ago, after i worked with senator boxer and others to get 53 senators in one day on a letter saying okay, let's get this approved, the governors along the route also sent a letter to the president saying hey, let's approve the project. so now you've got every single state saying hey, every single state on the route saying hey,

fine, let's do the project, every single one. here's the letter. it also includes the honorable brad wall, the premiumier of saskatchewan going through saskatchewan as well. i'm not going to read the whole letter but just a few excerpts." dear mr. president, as you begin your second term, we are respectfully urging you to move forward on the x.l. pipeline project. the energy relationship between the united states and canada is vital to the future of both our countries. it's an interest we share transcending political lines and geographic boundaries." the letter goes on and talks about how the project is crucial to u.s. energy security. working with canada for our energy rather than getting it from the middle east. the letter talks about thousands of jobs at the -- that the project creates, not only building this $7 billion pipeline but that all the jobs that go to the refineries and the other activities that go with it and talks about safety,

efficiency and reliability. now, the letter concludes mr. president, we consider the keystone x.l. pipeline fundamentally important to the future economic prosperity of both the united states and canada. we strongly urge you to issue a presidential permit and act swiftly to approve the keystone x.l. pipeline, signed by governors -- now, remember, senator baucus and i have been working on the effort on behalf of montana. you have got nebraska here. governor heineman just sent a letter in. now here are some of the other governors on this letter. sam brownback from kansas, the governors of north dakota and south dakota, governor mary fallon from oklahoma, governor rick perry from texas. in addition to other governors that aren't on the route like governor butch otter of idaho, governor sandoval of nevada,

governor jan brewer of arizona. republicans and democrats. but the point is the whole route, all the governors have written in and said hey, let's do this. let's do it. so -- so what's going on here? why does the president continue to delay the project. the long wait for approval is dismaying enough, but it represents a larger issue for our nation and begs a bigger question for policyholders. how will america ever build an all of the above energy policy if the president takes nearly five years to approve one piece of an inclusive plan, particularly, as i say, after everybody on the route has said hey, can we do this after five years, please, can we move forward, mr. president? to recount briefly, the $7 billion, 1700-mile pipeline will carry not only oil from

alberta, canada, to refineries of oklahoma and the texas gulf coast, but it will also carry growing quantities of the sweet crude from the bakkan oil fields in montana and oklahoma. even by modest estimates, it will create tens of thousands of jobs, boost the american economy and raise much-needed revenues for state and federal government. we have a deficit. here's a project that gets substantial tax revenue without raising taxes through economic activity, through job creation. further and perhaps most importantly, it will help put our country within striking range of a long-sought goal -- true energy security. for the first time in generations, the united states with its friend and ally canada will have the capacity to produce more energy than we use, reducing or eliminating our reliance on the middle east and other volatile parts of the world. the argument has been advanced that the oil sands will increase

carbon emissions and that failing to build the keystone x.l. will somehow reduce emissions. but let's look at that claim. that's the other piece. let's look at the environmental aspects of this project. today, more than 80% of all new recovery in the oil sands is being accomplished in situ, a technology that makes oil sands carbon footprint comparable to conventional drilling. in fact, the oil sands industry has reduced greenhouse gas emissions per barrel of oil produced by an average of 26% since 1990, with some facilities achieving reductions as high as 50%. today, heavy crude oil from the middle east and even from california produces more carbon emissions over its life cycle than the canadian oil sands. let me repeat that. today, heavy crude that we import from the middle east and even some of the california heavy crudes produce more carbon emissions over their life cycle

than canadian oil sand oil. we also need to factor in that if the pipeline is not built from alberta to the united states, a similar pipeline will be built to canada's pacific coast. that's what i show right here on this chart. from there, the oil will be shipped across the pacific ocean, a much larger sensitive ecosystem than the sand hills which we're not even going through now, to be refined at facilities in china with weaker environmental standards and more emissions than facilities in the united states. the u.s. moreover will continue to import oil from the middle east, again on tankers, factor in the cost of trucking and railing the product to market over land, and the result, contrary to the claims of opponents, will be more emissions and a less secure distribution system without the keystone x.l. pipeline project. think about it. so we say okay, we're not going to have this pipeline, even though we have built other

pipelines already. we're not going to get oil from canada. what happens? that oil goes to china, higher emissions. you are going to take it across the ocean which is greater risk than putting it in a pipeline. you will have it refined in refineries in china which have much worse emission standards than our own. and guess what we get to do. we don't get the jobs, we don't get the tax revenues. you know what we do get to do? we get to continue to import our oil from the middle east. how does that sound? is that a good idea with what's going on in iran and with what's going on in egypt, with what's going on in syria, the risk that the straight of hormuth could be blockaded or you could have further conflict to cut off supplies. is that what the american people want? they want to continue to get oil from the middle east rather than our closest friend and ally, canada? the american people would rather that oil goes to canada? of course not. and that's what we're talking about with this project. that raises another important

point. the administration's own state department completed its three-year national environmental protection act, ne pact, back in 2011 and determined there would be no significant impacts on the environment. that's what the administration determined in their own nepa process. and that raises the other point. the white house says well, we don't want to get ahead of the process, but the president effectively abandoned the process more than a year ago when he halted the project by executive action. had he not the state department in keeping with the usual process would have issued a decision on the permit after four years by december, 2011, according to a letter secretary clinton sent to me in august, 2011. i worked toward approval of the keystone x.l. pipeline, first as governor of north dakota and now

as a u.s. senator because i believe it is just the kind of project that will grow our economy and create the jobs our country so desperately needs, and it will do so with good environmental stewardship. at the same time, it will reduce our dependence on the middle east for oil, which is what the american people have desired for decades. the keystone x.l. pipeline project is long overdue. for the benefit of our economy, our environment and our long-term energy security, president obama needs to approve it. now, without further delay. mr. president, i would ask unanimous consent for just several minutes on another topic in regard to a recipient of the medal of honor from my state of north dakota. the presiding officer: without objection. mr. hoeven: mr. president, i rise today to honor one of our nation's true heroes, army staff

sergeant clinton romashay. on monday, the president will present sergeant romashay with our country's highest military award, the medal of honor, for -- quote -- acts of gallantry above and beyond the call of duty, end of quote. clint comes from a long line of military heroes. his father is a veteran of the vietnam war. his grandfather fought in the u.s. army during world war ii. romashay often cites his grandfather as his greatest hero. it wasn't surprising that clint followed his example in joining the army in 1999. staff sergeant romashay showed courage every day that he donned his army uniform, but especially on october 3, 2009, one of the deadliest days of the war in afghanistan. on that day, hundreds of taliban fighters ambushed american combat outposts from all sides

with grenades, machine guns, mortars and rifles. heavily outnumbered, clint and his fellow soldiers quickly fought back in what would turn out to be a deadly day-long battle. sergeant romashay fought valiantly. he darted into danger to draw out the enemy many times. he himself took out a machine gun team. he was working to take out a second when he was wounded by shrapnel from an exploding grenade. his medal of honor citation reads -- quote -- "undeterred by his injuries, staff sergeant romashay continued to fight, and upon the arrival of another soldier to aid him and the assistant gunner, he again rushed through the exposed avenue to assemble additional soldiers. with complete disregard for his own safety, he continually exposed himself to heavy enemy fire as he moved confidently about the battlefield engaging and destroying multiple enemy

targets, end of quote. staff sergeant romesha exemplified the values that theodore roosevelt, also a medal of honor recipient, spoke of when he said -- quote -- "courage is not having the strength to go on. it is going on when you don't have the strength." end quote. despite his wounds, sergeant romesha never stopped battle. he helped to recover the bodies of his fallen friends. the battle lasted for 12 hours. eight soldiers lost their lives and 22 were wounded, a fact that romesha humbly reminds us of whenever his bravery is touted. in fact, sergeant romesha said -- quote -- "what i got injured with was nothing. i have buddies who lost their eyesight, who lost limbs. for that, i would rather give them all the credit they deserve for the sacrifices they made.

for me, it was nothing." end quote. for sergeant romesha, he was just doing his job. for the rest of us, he is a true example of courage and selfless sacrifice. he went above and beyond the call of duty repeatedly risking his life to defend his post, and more importantly to help his fellow soldiers. we are grateful for his service and for his example to us all. today, clint resides in minot, north dakota, where he and his wife tamara are raising their three children. i am certain he is ever much the hero and inspiration to them that his own grandfather was to him. my wife and i join our fellow north dakotans and americans in honoring sergeant romesha for his heroic and selfless service. we thank him for his exemplary actions on that dangerous day in afghanistan and every day that he served our great country.

with that, mr. president, i yield the floor and note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

quorum call:

quorum call:

quorum call:

mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: i ask unanimous consent the call of the quorum be terminated. the presiding officer: without objection. mr. reid: i now ask we proceed to a period of morning business with senators allowed to peek for up to ten minutes each. the presiding officer: without objection. mr. reid: i ask unanimous consent the senate proceed to h. con. res. 11. the presiding officer: the clerk will report. the clerk: h. con. res. 11, providing for a joint session of congress to receive a message from the president. the presiding officer: is there objection to proceeding to the measure? without objection. mr. reid: i ask unanimous consent the concurrent

resolution be agreed to, the motion to reconsider be laid on the table, there be no intervening action or debate. the presiding officer: without objection. mr. reid: i ask unanimous consent that the senate proceed to s. res. 27. the presiding officer: the clerk will report. the clerk: senate resolution 27, designating the week of february 4-8, 2013, as national school counseling week. ferraro is there, to proceeding to the measure? without objection. the presiding officer: is there objection to proceeding to the measure? without objection. mr. reid: i say before asking consent to pass this, this is an extremely important -- this is extremely important that had been brought to the attention of the senate. around the country today we have about one school counselor for every 1,400 students sm student. the presiding officer attended a number of meetings in the last couple of days and that's the information we got there. that is terribly troubling. with all the problems we have with these boys and girls, to

think that they'd have to win some kind of a lottery before they could see a counselor. we know class sires are too big and we need to do something about that, but we really should do something about mandating more counselors for schools. i ask unanimous consent the resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid on the table, with no intervening action or debate. the presiding officer: without objection. mr. reid:man, i ask unanimous consent that the appointments at the desk appear separately in the record as if made by the chair. the presiding officer: without objection. mr. reid: i ask unanimous consent that there they be printed as a senate document, a compilation of materials from the "congressional record" in tribute to the retiring members of the 112th congress. the presiding officer: without objection. mr. reid: i ask unanimous consent that when the senate completes its business today it adjourn until 23:00 p.m. on monday, february 11, following the prayer and pledge, the morning hour be deemed expired, the journal of proceedings be approved to date, the time for

the two leaders be reserved for their use later in the day, and that following any leader remarks, the senate resume consideration of s. res. 47, the violence against women act, under the previous order. the presiding officer: without objection. mr. reid: mr. president, i haven't had an opportunity to speak to the republican leader, but we're going to have -- and we have -- we could have as many as seven roll call votes monday. i am of the mind, after speaking with the republican leader, that we may have a couple of these votes and put the other votes over until sometime on tuesday at some reasonable tievment i this that you that would probably be better with some of the things that i can see on the horizon. but everyone should -- will need to be here for monday for votes. we may not have all the votes monday night. we may try to put some of them over to the next day. therefore, mr. president, there being no further impis to come to the senate, i ask that we adjourn under the previous order. the presiding officer: the senate stands adjourned until senate stands adjourned until

>> the chair lays before the send a certificate of appointment to fill the vacancy created by the resignation of senator john kerry of massachusetts. the certificate the chair advises in the form suggested by

the senate. that is now a junction to the certificate will be waived and will be printed in full in the record. the senator designating will now present himself at the desk. the chair will administer the oath of office. ask you to raise your right hand. [inaudible] >> do you solemnly swear that you support and defend the constitution of the united states against all enemies, foreign and domestic, that you bear true faith and allegiance

to the same, that you take this office freely -- take this obligation freely without any mental reservation or purpose of evasion and that you are well and faithfully discharge the duties of the office upon which are about to enter, so help you god? >> i do, so help me god spent congratulations, senator. welcome. well done. [applause]

[applause] >> here's a look at our primetime schedule on the c-span network. beginning at 8 p.m. eastern tonight on c-span, the senate intelligence community holds a confirmation hearing for john brennan to become the next cia director. on c-span2, outgoing defense secretary leon panetta, and chair of the joint chiefs of staff general martin dempsey testified on the attack on the u.s. consulate in benghazi. and on c-span3 tonight education secretary arne duncan discusses the no child left behind law, and the obama administration's waiver process. all these events are tonight beginning at 8 p.m. eastern on the c-span networks. >> having observed a steady improvement and the opportunities and well being of our citizens, i can report to you, the state of this old but

useful union is good. >> once again, in keeping with time-honored tradition i've come to report to you on the state of the union. and i'm pleased to report that america is much improved, and there's good reason to believe that improvement will continue for the data,. >> my duty tonight is to report on the state of the union, not the state of our government, but of our american community. and to set forth our responsibilities in the words of our founders, perform -- to form a more perfect union. the state of the union is strong. >> as we gather tonight, our nation is at war. our economy is in recession, and the civilized world faces unprecedented dangers. yet, t yet the state of our union has never been stronger. >> it's because of our people jot our future is hopeful, our

journeyur goes forward and the state of our union as well. r >> tuesday, president obama delivers the issues addressed live on c-span with our preview program starting at 8 p.m. eastern and the president at thr nine, followed by the gop response and your reaction. our the state of the union tuesday night on c-span, c-span radio and c-span.org. >> there is no prescription or role model or cook book for being first lady. and if you look back at the lives of martha washington our abigail adams or dolly madison, or edith wilson or eleanor roosevelt or best truman or mamie eisenhower, you can see that each woman has defined the role in a way that is true to herself, how she can help her husband take care of her family, make our contribution to our nation.

>> c-span's new original series, first ladies, influence an image, their public and private lives, interests and their influence on the president. produced with the white house historical association, season one begins presidents' day figure 18 at 9 p.m. eastern and pacific on c-span, c-span radio and c-span.org. it was 100 years ago this month that the 16th amendment to the constitution was ratified giving congress the power to collect federal income tax. earlier this week the urban institute hosted a discussion on the history of the federal income tax as well as proposals for replacing and changing the income tax system. this is about an hour and a half. >> good afternoon, everybody. welcome to the urban institute's first tuesday where we celebrate the 100th anniversary of the income tax. my name is howard gleckman, i'm

the editor of tax power center block and moderator for today's program. 100 years ago today, delaware became the 36th state to ratify the 16th amendment to the constitution. .. >> director of the tax history project of tax analysts and prolific author whose latest

attack was in the rage of fdr, just out today, and i have a copy here published by the urban institute press. gene wrote about tax policy like "contemporary u.s. policy," and not just write about it, but lived it. three decades ago, he was a godfather of the tax reform act of 1986, one of the key moments in the history of the income tax. he holds the richard b. fisher chair at the urban institute. involved in the income tax in the treasury and irs, a fellow and co-director of the urban brookings tax policy centerment finally, nina olson, tirelessly represents those of us who pay taxes. those of us who must battle against the growing complexity of the code. just a week or so ago, her office released the latest

report on the state of the tax code, a doesn't that describes with great can dore the flaws in the current system and describes some things we can do about it. let's starts with joe who is going to give us a brief history of the income tax, and before he starts, let me let you know that after we do our presentations, there's the opportunity to ask questions, and for those of you watching on c-span or the web, send in questions at publicaffairs@urban.org. joe, want to get us started? >> sure. there's a reasonable number of people here. i tell people i have the worst possible job for a cocktail party. i walk in, and they ask what i do, and i say i'm a tax historian. combination of april 15th and a high school class somewhere, and it's incredibly boring for so many people. that's the initial impression, and that means this year, as i've been calling it lately, a

landmark in civic, and this is an important moment to recognize, this is a hundred years of struggling with the tax that everybody, as howard said, loves to hate. what's really striking to me is that complaints about the income tax are just as old as the levy itself, and many the exact complaints we have today. from the start, it's been a nightmare. in 1915, just two years after the first income tax is enacted, one critic says it's so complicated it's utterly impossible to understand its meaning saved by consulting a palm reader. that's two year of complexity piledded up. americans called the tax intrusive and unfair and un-american. all of that complaining has done little to slow its growth. the story of the income tax in the united states is one of steady growth more or less, and at some points, quick growth.

there's a puzzle here. if we hate the tax so much, why is it it grows steadily that every proposal to replace it has been considered and rejected over the years, and there's been many, many of the proposals. i think the answer to that puzzle is two-fold. the income tax does two things well. perhaps, most important, it raises money quite well. it turned out that not exactly by accident, but i think it surprised many people, that this was a great way for the federal government to raise a lot of money really quickly, and it was relatively easy to scale up. just as important, really, in the long run is that the taxes also comported with notions of fairness, at least as americans have voiced that through politic, and, you know, we don't have survey data for the early period, but, certainly, since they started polling in the 1930s, it's been very clear that americans are reasonably toller rapt of the income tax and

believe it meets a standard of fairness, defined in ability to pay. those few things, i think, have done a whole job keeping the tax in the tax system and growing throughout. the original tax was small, top rate of 7%, and exemption of $100,000 if you adjusted for inflation. it was just a very light tax applied to a small number of people. it was designed, principally, to make the tax system fair or fairer and not raise a lot of money particularly. a lot of teem say we can learn something about tax policy today. how light it was. we have to return to that light, narrow income tax, to which i say, it's important to remember that just five years after the tax was enacted. the top rate was 77%. the same lawmakers, essentially, the same people in congress who thought 7% was a good number in 1913 thought 70% was a good number five years later. there's a war in the middle, and that's the story of the tax

policy in u.s. hits ri that wars change it. world war i expands the tax, the exemption cut by a third. the number of tax patrons rise, and the rate goes up. another war comes along, and it works more dramatic change on the tax system. world war ii, the famous phrase, transforms this to a mass tax. in six years, the number of households filing returned in connection withed ten-fold from four in 1939 to 33 million in 1945. the income tax changed the code for overalls because so many middle class and working class americans were previously reserved just for rich people. the transportation was important, i think, for -- that world war ii transformations was important for two reasons. first, it made the income tax the largest source of federal revenue. it had gotten that title in the

1930s when it pushed excise taxes. hard to imagine, but we used to raise pretty much half the federal revenue by taxing consumer goods, and especially alcohol and tobacco. that changes in the 30s, but the 40s, the war changes that once and for all, and we never looked back. the income tax is the pillar of the federal tax system. that changes the relationship of americans to their government. up until the 1930s and for many of americans up until the 40s. the monthly contact that people ever really had with the federal government was the post office. the tax system changed that. i mean, not just on april 15th, but through withholding for world war ii also. we start to see the hand of the federal government in our paychecks, but in our lives, and i think that really transformed the way americans thought of the government. they were getting benefits, things like social security, for instance, and at the same time,

the costs of government are clearer to people after the war. more changes came after the war. in the 1950s, they hold on to the high rates, as high as 94% in world war ii. it stays over 94% in the 1950s despite the republican president for most of that decade and a republican congress for some of it. the reason is because the president sort of makes peace with a tax system that he inherits from harry truman and into debt reduction and retirement than tax reductions, at least in the short run, but that doesn't mean there is not tax reduction in the 1950s. another thing we hear a lot about today is people who are fans of raising tax rates now and burdenses, especially on the rich, will point back to the 1950s and say, look, here's app era of good growth, and it was good, but not great, but it was good, and we have these really high tax rates, so, apparently, high tax rates don't matter to

growth. economists here problemtize that in a number of ways, but i will a little bit and say it's true, but effective tax rates, what people paid declined steadily in the 1950s. in the 50s, policymakers figured out the deal here. they could have high statutory rates, but carve out the base with tax performances of various kinds, loopholes, and that would reduce the effective rates for most taxpayer, and by most, quite a lot. if you look at what happens to the rates paid by people over the 1950s, they are dropping really quite quickly. that's the story of the 50s. it's sort of a notionally high rate, but declining actual tax burdens. those high tax rates that economists have all loved to hate in the 1950s succumbed to a democratic administration in the

1960s when the kennedy administration passed big tax cuts. this brought the top rates down from above 90% to 70% in 1965. that was progress. there was base broadening as well, not as much as the economists wanted to see because lawmakers were pretty entrenched in providing that to lucky constituents. i think it's an unholy compromise. the rate reductions in the 60s started to walk it back a little bit, but the time, and gene talks about it, at the time when was going to flower, that kind of tax reform, lowering the rate, broadening the base, was not quite there yet, but what happens is despite the lower rates and despite gestures in the direction of base broadening, there is a general decline in public support for the income tax, a sense that it's not receiverring -- serving its fairness goal. a moment ago, i said the

fairness in american politics really has two elements. on the one hand, it's framed in terms of, hey, those guys should be paying more, particularly, the rich should be paying more. the system is more progressive, it needs to move the tax burden further up the income scale. that's one fairness that animated a lot of change. the other kind of fairness is, hey, they get away with murder. that's saying loopholes are a problem, underminding the lee jilt ma sigh of the tax -- legitimacy of the tax system. that's been a con at that particular -- constant in the tax policy for a hundred years. roosevelt and every president since made use of that. i think that really started to pick up in the 1960s. there's a outcry in 1969 when the treasury department says there's hundred some odd taxpayer making a million dollars a year not paying income tax. that's where the amt gets a start, and that really sets the stage for income tax reform, which is gene.

>> was that is transition? gene. >> joe had eight minutes to talk about 65 years of tax policy. i got eight minutes to discuss 35 years. i'm in good shape. i often divide up the post war era into three parts. first part of which joe talked about, the era of easy finance. if you look back at world war ii up to about 1981, almost every major tax act is a tax cut. there's one exception. there is a mild surtax. in fact, that was the tax cuts as well, two years of surtax, a tax cut that was permanent. there was an era of easy finance in part because of the bracket crees, and in the carter administration, taxes actually went up almost as much as they were lowered in the reagan tax cuts.

they remember the tax cuts, but don't remember how much taxes went up because the movement of people to higher brackets as income went up with inflation in the late 70s. starting after 81, we have what i call a fiscal straight jacket era because every initiative on the budget and the tax side is called the take awayside of the budget. that is, we decided we have to do something about this, and we engaged in budget reform in 82 and 84. we engage in tax reform in 86. social security reform in 83, also, expands the tax rate and social security benefits. every initiative in that period is up to be on what i call the take awayside of the budget. the budget was dominant, and then about 97 and on ward, we go into what i call the two senate era, basically, in terms of the budget as a whole, it's all give aways. you name it, we give it away, domestic spending increases,

entitlement spending increases, tax cuts, defense spending increases, do it all, and not identify it. you might wonder how it works out because there's a balance sheet here. the balance sheet has to be met. well, once government is large, the government, that joe tells us we were left with after two world wars, once government gets large, it's mainly economic growth that provides the revenues so, for instance, from roomed -- ronald reagan's day, the economy doubled in size. revenues approximately double, i'm simplifying, but it grows the economy. whether it's a few percentage points up on the tax rate or down on the tax rate is not the dome in a -- dominant size of the economy, but it's the growth. whether it's flexibility in the budget allows congress to operate and whether to give it

back to people in tax cuts or spending increases. what happens when we have the budget tightening which we have and today is that essentially so much has been given away for the future, that the revenue growth that comes along is all that's t been. that starts the history of what's going on in this period, the extent to which commitments from the past are starting to eat away at the revenues that we get, and that then affects all of the tax policy we see in this period. going backed 20 period, and i can't -- i don't want to spend too much time on it. i do want to focus a little bit on what happened in the tax reform act of 86 because people pose it as a model for what we could do today. again, back to the period, 81 is the last of the major give aways of this era of easy finance. people think 81 defines the reagan administration, but, actually, that was when they essentially did the same thank

-- thing that happened before, a tax cut within a spending increase. it was one more item on the give awayside. after that, back in the staid of the take awayside of the budget. budget reforms, social security reform, in 86, we decided we're going to try something which was revenue neutral and that is, we're not going to change the distribution of the tax burden. it's not about shifting income around. we're not going to change the size of government. what that does, very uniquely at that point in time, unlike almost, say for every previous tax reform effort, is it takes off the table the two major items over which congress will essentially focus almost all its attention on any bill, and that is the size of the government and progressivivity of the tax system. when those two debates engage, it's hard for what i will call the traditional tax reformer, those people who worry about simplicity, those who worry about equal justice, equal treatment of people, and equal

circumstances, efficiency, those issues come to the floor only when you can, to some extent, push aside the big debates over the size of the government and big debates over the progressivity. that happened that allowed tax reform in 86 to happen. in that light, you can make tradeoffs with two really big trades we had there, the first one, most people remember, which is we hadding -- those in the audience remember, growing amounts of tax shelters. these were doctors and lawyers and professionals, middle and upper middle income people and high income people finding ways through partnerships to invest in partnerships that were yielding extraordinary amountings of negative statements of income, and this partly because of what was going op with inflation and high interest rates, partly the deappreciation schedules, they were not losing the income. the income was accrued over here, but they were getting deductions. reagan wanted to lower rates, a

great compromise. get rid of the tax shelters that favored people at the higher end of the income distribution in exchange for lower rates. beginning back to the inflationary period leading to tax reform in 86 was inflation did a couple things. it moved many of the poor under the tax froze. it also, and i won't go into the detail, but it alaska led 20 very -- it also led to very high increase in the taxes paid by families with children relative to the families without children. that is because of the erosion of things like personal exemptions. they hit hardest on the families who were larger. here's another great liberal conservative compromise. i mentioned tax rates. vis-a-vis the tax shelters is one conservative compromise. here's one that favored pro-family, often social conservatives in the pro-family group united with liberals who didn't want to tax the poor leading to another compromise. now, people look back and say, why can't members of congress

get along today as they must have done back in the wonderful 80s? well, they don't really remember the 80s as well as most of us who lived through it. in 84 when reagan announced that he was wanted a tax reform study, congress literally burst out in laughter. the democrats so distrusted him given previous enactments, they didn't expect a study to come from treasury and be forthcoming. it was not so much they started with this great sense of ability to work together, but they found through proposals that dealt with principles that appealed to both sides, they found they could find some common era of agreement. let me quickly jump as my time is about up here, to the current period. after reagan, there's no president interested in traditional tax reform in terms of simplifying, treating equally, trying to get a lot of the buck out of the tax code. we've gone through 20 or 30 years of debate over the top tax

rate which it will be 48%, 30%, 28%, or 33%. that dominated the public's sphere. along the way, both parties enacted many new tax provisions that added to all of the various tax subsidies, expenditures, the complexity that knee that talks about when she comes along. we have little interest in traditional tax reforming and the debates are budget debates, back into the issues of how largely we want government and to what extent do we want the system to be progressive, are more progressive. this era of those fights, i think the era of the two center era where everything was on the give awayside of the budget ended because we've gone into a period where we had a great recession, where we've got entitlements, including tax entitlements that's spending automatic and subsidies that go over time, they dominate the budget.

we have so many things that have come together in the current period m i think we're in a new fiscal era. we have not figured out how we are going to get through it, and i'm going to let nina tell us how to solve that problem on the simplicity side and turn the floor over to erik for a major debate in the time which is consumption versus income tax. >> eric? >> thank you, thank you very much. i think as you heard from the previous speaker and you know, the income tax is a dominant way we raise revenue in the united states, at least at the federal level, however, there's always been substantial opposition to the income tax, and so it's my job to talk about that a little. tax experts forever debated whether the right basis for imposing taxes consumption or income. it is an old debate. beginning in the 1970s which was when i, gene and i came to

washington, there was growing academic support, also, for replacing an income tax with a consumption tax, and that, even among some set of public finance economists, became a dominant point of view. i'm going to discuss the reasons for that, some of the variants proposed, and, also, some of the reasons why that might have been a bad idea and why it has not happened. so to start off, it just definition, what is a consumption tax? look at retail sales taxes, estates and say that's what it is, but, of course, it's much more than that. if you look broadly at how people use their income, they use it two ways. they use it to spend money, or they save it. an income tax, consumption tax can be thought of as an income tax that exempts savings, pure and simple. there are lots of ways to do that, so there is not one consumption tax alternative;

there are many. the four major ones to go through them quickly. the retail sales tax, which you are familiar with from the state practice, tax on the consumption when people buy goods, all collected from businesses, from retailers. there's the more common version of the sales tax used in europe and new zealand, australia, canada, japan, felt attacks on value added, which is basically a retail sales tax, but it's collected at each stage of production. it's a value added by stage and adds up to retail sales at the end. those two taxes are collected only from businesses. the third version is collected partly from businesses, partly from households, and that's often called the flat tax. it's really simply a value added tax, but instead collecting all

value added to the taxes, they pay the employees, and employees pay a tax on the wages received. a thought says that's the same of the value added tax other than the point of collection, so that's a popular picture promomented in the united states. the final version, and one version of that, the flat tax, the x tax, a flat tax with graduated rates on earnings, and, finally, you can collect it all from households in the form of a personal income tax where you report all your income, you take into your income any additional amount you borrowed, and you deduct any amount you put into savings accounts. instead of looking, trying to add up everything you spend, you just simply look at your income, subtract your net savings, and that's your tax base. in all of the taxes, capital

purchases by businesses are deductible, and that's what makes them consumption tax. so, who is for these things? well, there's a long history. david hume, the scottish philosopher favored consumption taxes on the grounds they were voluntary: you didn't have to spend money, particularly like taxes on luxuries. you could avoid them if you wanted to. alexander hamilton had a similar perspective favoring consumption taxes believing they couldn't erase to ruinous levels, safer to do that than have an income taxes and wanted to discourage exports which is another issue that mostly disappeared. in the mid-20th century, the famous proponents were the american and englishman. the american, irving fisher, who

wrote a book on it in 1942, and joe may want to talk about the fact that the secretary of the treasury proposed a tax in 1942, and, apparently, was laughed out of consideration. anyway, he was a big proponent of that. there was a left wing british economist, nicholas, who wrote a book called an expenditure tax in 1955. interestingly enough, the views on that came from both the right and the left. from the right, it was spending taxes, the idea was to exempt savings and to help growth and also not worry about progressivity so much. from the left, nicholas viewed the expenditure tax as a way to get at the inherited wealth, the land in england, taxed when they sent it down, somehow felt income tax was not reaching. now we go on to more modern proposals starting in the 70s,

1976, the treasury put out a tax reform proposal at the end of the ford administration. there were two model income taxes and a consumption tax, but the author of the study, who was the deputy assistant secretary then, david bradford, was basically pushing the consumption tax idea, and this book blue prints for basic tax reform, was a very influential book, and the proposal got a lot of attention, and that was basically an individual tax. it would all be collected at the individual level with a deduction for savings. by the way, in case you think only economists favored that, a big infliens on that was a harvard professor in favor of the income tax. this resummaried later in a proposal by senators in the 1990s called the usa tax,

universal savings accounts, which my colleague helped to design that. i second idea that was very popular with the so-called flat tax that was a book originally published in 197 # 2 coming from "capitalism and freedom," a chapter on the ideal income tax, and the ideal income tax he describes is actually the flat tax, which is consumption tax. this idea was picked up by house majority leader dick army and by presidential candidate steve forbes in the 1990s. again, like all the other plans, it didn't go anywhere. david bradford came back, persuaded the original idea might not work with the proposal for the x tax, essentially, the flat tax with graduated rates, and that still popular.

there's a recent book published by the american enterprise institute by allen and bob mccarol advocating that. that idea is still around also. there's also the so-called fair tax, a retail sales tax, house ways and means chairman in the 90s favored that, and there's a very interesting plan by michael, which would be a value added tax which would collect revenue, but michael would retain an income tax with a very high exemption level, very much like the original income tax that we had in 1913 or before world war ii i should say. why do people advocate consumption tax? some people say it promotes economic growth and competitiveness because you remove growth, removing the tax to return to savings to have stavings in investment. this is a debatable argument,

but because it's destination based that exempts taxes and imports the consumption tax, business tax variety. fairness issues, and simplicity issues are not often referred to, but they were the ones that were actually stressed in the blueprint volume. the idea of fairness that was a consumption tax better measured individual incomes to pay over somebody's lifetime. in contrast, an income tax for people with the same present value of lifetime income and income tax discriminates against people who consume later in life and discriminates, also, against people whose earnings patterns are such they earn earlier in life so they have to save more in order to smooth out their lifetime consumption. the other argument on grounds of simplicity is that if you didn't have an income tax, you don't have to worry about a will the of issues relating to the

measurement of capital income such as what deappreciation rules to use, how to tax capital gains, the corporate income tax, inflation adjustments, if that's the problem, and so forth. plus, there were a number of reasons why people were concerned about these approaches. one was concerned about fairness in progressivity. certainly, for the one's collective from business, it was impossible to make them truly progressive, and those collected from individuals, there was a concern about whether you could really get the rates high enough at the top level to compensate for the fact you were exempting savings. for the ones for individuals, there were a lot of concerns about how you could administer them, and there was certainly concerns about transition issues. how you go from one tax to another. very big concern. for these reasons, these and

other political reasons, these have never happened, and, of course, our friends on the conservative movement are always worried about adding a new tax source, they are worried about a value added tax being a money machine, kind of the same worry that alexander hamilton had on the income tax, so, i guess, any tax can be an issue. the future, a couple brief comments, we're running into, as you know, long term budget problems so the current income tax may not be up to the tax of raising sufficient revenues. income tax reform, however, is very difficult, and i've written about tax expendtures, not optimistic they are cut that much, and the globalization makes it much harder to tax investment income which is easily movable, another thing that makes an income tax hard, and as we look around the world, many countries rely on consumption taxes for a larger

share of revenues than the u.s.. white the idea of replacing the income tax with consumption tax failed even though it persists, i think that we really need to think seriously about reambulancing the system and raising more revenue from consumption than we currently do. >> eric, thank you. >> okay, well, gene said i was going to solve all the problems and simplification so my recommendation for that is that everybody read my annual reports to congress and do everything that we recommend in it, and we'll just be fine, and that's the solution. [laughter] i'm actually here today to talk a little bit about the impact of all of these changes of the interim revenue code on the internal revenue service. you know, before the mid-1990s, when you wrote a check to pay taxes, you wrote a check to the internal revenue service. i can't tell you how many people talked to me about the code, and

they don't, you know, thinking it's the irs has any control over the law, which it has virtually no control over what congress end acts or what the president proposes. in 1990, congress passed a law that said you have to write the checks to the u.s. treasury to remind you the irs doesn't get the money and pocket it itself. in our volume two of the 201 # 1 report, we published a study, a demographic history of the internal revenue service, essentially, certainly revenue code, which looked at from the irs perspective, what the changes in the code did to the irs tax collector, and i've just rehashed some of the things that joe said just to create some context here from my later remarks. you know, the system, as joe has said, started out as raising revenue, primarily from the most affluent. in 1916, almost 27, over 27% of

the returns were filed by merchants, manufacturers, lawyer, and doctors. those were the professions listed on their returns. by world war ii, you get that significant expansion to the mass tax, and with wage withholdings, and basically, the war office directing tax policy, and the middle class, the expansion of the code into bringing the low income population into it through various refundable credits, and you see the transformation of the tax collector, mainly the irs because of the benefits. in 1913, the individual taxpayer population was 358,000. by 1944, it became 47.1 million, just in that short period of time, and r today, as of 2011, and today, it's 141.2 million

taxpayers. those are the individual taxpayers. the irs's response in this is to respond to the major burgeoning of the taxpayer population doing more and more automation moving from personal contact and geographic contact, and i'll talk about the consequences of that. i want to talk right now about diversity of the population, and based on the 2010 senses, just the united states population today, the united states census identified themselves as minorities, and that does not include hispanics who one-half of them identified themselves as white. a fifth of the population speaks language other than english at home. 15.1% are in poverty, and over 5% are households with unmarried parents, and 13% are over or equal to or over age 65, 79%

live in urban areas, and 21% live in rural areas. now, you know, that is the population that the irs deals with today to go back with who is being pulled into the tax code of that population. in 1913, the personal exemption was $3,000, about 65,000 in 2011 dollars. in 1918, only 15% of the american families paid income taxes. in 1944 when we had withholdings, the standard deduction was $5,000, about 62500 in 2011 dollars. you really don't have the low income pulled into the code. by 195 # 3, however, 36% of the u.s. population were return filers, and, today, almost half of the u.s. population are return filers. when you about how many children there are, it's interesting that half of the u.s. population are

pulled into the internal revenue code. now, each year, what happens is that the irs itself struggles with the complex code. there's late year tax law changes. we didn't know until, you know, this year, whether the amt extension, the way the exemption was going to be adjusted for inflation or not, and we had to delay the filings seasons for the third or fourth year in a row now, no way to run a tax system. we are struggling with identity theft, refund fraud, and return preparer fraud, struggling with new dispersement programs, the make work pay program. we had economic stimulus payment programs. we had the first time home buyer credit program, all things enacted late in the year that the irs turned on a dime, and now we have coming at us, health care, and our role in health care. just to give you some measurements, some sense of scale in the dispersements that

we're paying out, for the 2011 tax year, for the earned income tax credit, a refundable credit for working poor families, primarily with children, basically, at the end of the day, audits, but after the authorities, 27.4 million taxpayers claim the earned income tax credit in 2011, and we dispersed 62.5 billion dollars in eitc. i mean, that's an enormous amount of money for someone -- for some entity that's nominally a revenue collector. now, the irs code, or the internal revenue code, really, we have done up a little bit of a statistics about it, and estimatedded using the paperwork we duction act estimate that the irs is requiredded to publish every year, that it takes individual and business taxpayers approximately 6.1

billion hours to meet the annual filing requirements. that doesn't have to do whether you are audited, get a notice from the irs, just to do the filing requirements, 6.1 billion hours, translates into 3 million full-time workers. that's it. that's all we dedicate to the filing requirements. the code is four million words long. we counted 4500 changes since 2001 which averages out to be more than one change in the tax law a day. 59% of individual taxpayers pay someone else to prepare returns, and 30 #% by software to prepare returns. there's 11% of the population, of which i'm one of them, you know, who sit down and try to wrestle through preparing return les unassisted. 71% of sole proprior tores use paid preparers, and i note the role of software, one of the major things that happened in the last, say, three or four decades, the role of tax

preparation software as an enabler of complexity is not underestimated. most taxpayers don't know how, you know, onerous figuring out, filling out the work sheets are because they don't do it themselves. the machine does it, and, maybe, they'll get a surprise at the end of the day when it says, you know, surprise, you owe the alternative minimum tax, and they have to go back and look, but they really have no idea about the computations, so it allows computations to reside in the code because no one's sitting there screaming, "you're making me go through the steps," and, you know, divide by 64 and add 28, and multiply by 11 to get something. just to make a point, these things are not benign in terms of compliance. this year, in our annual report, and this study is on the website for this program, we did a national survey of sole proprior

tores, and we interviewed a representative sample of sole proprietors from the 2009 tax year, and what we found was that only 16% of the sole proprietors said they believed the tax laws are fair, and that goes to joe's point about one of the things that people believe or supported the income tax was that it was fundment tally fair, and now we have 16% of the sole proprietorship population, the largest part of the tax gap, by the way, and they have the greatest opportunity to not comply. only 16% believe that the tax laws are fairment only 12% that taxpayers pay their fair share of taxes, and 73% said that the wealthy had ways to minimize taxes not available to the average taxpayer. we believe, and our study really actually lays out, that there is a direct correlation between distrust in the irs, distrust in the federal government, and distrust in the internal revenue code and noncompliance, and i encourage you to read that

study, just an absolutely fascinating study. what's the irs doing with all of this? this very diverse population, this dual mission it has, not just as the tax collector, but a benefit payer, well, it is dealing with, you know, itself, it is collecting about 96% of the federal revenue that comes in. we collected in fiscal year 20122.5 trillion, and revenue, return on investment on average is $214 for every dollar spent. on the other hand, the irs's budget cut the last two years, and we still don't know what the budget is. we are not answering, essentially, one out of every three phone calls of people who want to get through to a live assistant. taxpayers who get through to a live one have to wait 17 minutes on average to get through. we are behind on our

correspondence with taxpayers. over 47% of the correspondence is over age, meaning that it is over six and a half weeks old before we get a response to them. the picture does not look good from here. although i will be talking about this later, the irs's response to this is to turn to automation meaning there's less opportunity for it to talk to taxpayers and find out what they are really saying and what help they really need, which all ties into our compliance rate and taxpayers' ability to comply with the laws so if i painted a depressing picture, is because i view it as a depressing picture. >> nina, thank you. lots to chew here. i want to start with eric's issues. i think sometimes we think about consumption taxes and income taxes as the binary choice. i think it's useful to talk a

little about how the current income taxes is a hybrid. this is not a pure income tax by any standards. give people a sense of what's going on here. >> well, certainly. i mean, there's certainly transactions in the individual income tax which are taxed the way they would be under a consumption tax. the obvious one is the way you contribute to your 401(k) plan or your ira, get a deduction and the employer contribution is not included, you accrue the income tax free and pay tax when you pay it out in retirement, and, of course, that's exactly the way a consumption tax treats that kind of transaction. if you combine that with the fact that we don't tax return to owner occupied housing, you are really basically treating the investments of the vast majority of the population under consumption tax treatment. you, we don't have a consumption

tax because we have a corporate income tax that still has depreciation rather than expensing. we have very complicated income sources rules for international taxation, and issues there, and certainly for high income people, they pay taxes on their investment income. we have kind of a hybrid. it's a mix now. >> uh-huh. transition to a consumption tax might not be as far as -- as big a leap as it might be if we had a pure income tax? >> that's true, but i think it still would be a big leap in terms of the timing in which we handle certain transactions. >> joe, can you tell us a little about the discussion of consumption taxes over the years and why it was this never got anywhere? >> sure. this comes from the consumption tax regime. all federal revenue is coming

from tariff duties, consumption taxes on imported goods, and a few excise taxes, or many, actually, but just a few raised money. they are syntaxes today, taxes on alcohol and tobacco. that's where the federal government got its money. the complaint was it was regressive, to some degree a regional complaint. southerners and westerners were not happen with that tax system and calling for income tax. it's a reaction to a consumption tax regime, but from the start, people are making the same case. they were taxing the wrong thing, tax what we want, don't tax savings, shouldn't be taxing investments. you know, facilitating investment in the facility so as early as 1921, i think, there's a proposal for a national sales tax. that idea kicks around through the 20s, over and over one, and

oddly enough there's a republican and a conservative old-school republican that presidents them from the income tax, and they say, you know what? no, we'll lower the rates, and that's a story of rate reduction, 77% of a rate in 1917, drops to 17% in 1925, striking as well, but the idea of shifting to consumption tax, or more often adding a major, sort of broad based consumption tax to the mix, that keeps kicking around. roosevelt considered that in the begins of the 1930s. there's the moment it came closest to actually happening, during world war ii. they needed the money. the war starting. what are we going to do? well, obvious choice is raise more money with the income tax, but people said that was the wrong idea. we have to create a new national sales tax. there are proposal out there

that get through the legislative process to create a true national sales tax like the fair tax that we talk about today. there's a treasury official, randolph paul in the 1940s writing the history of the period, and he say what's striking about tax policy in world war ii is we didn't end up with a sales tax because it looked like we were going to. i mean, that's the pre-history, early history of sales tax proposals. i think eric chartedded the rest of it for us pretty well. income tax critics have almost always wanted a sales tax instead or a consumption tax instead of some kind, and they never got very far. the answer as to why is because congress very rarely abandons or even scales back a revenue tool that's working pretty well, and there was no compelling reason to make these changes. there was maybe good reasons, maybe it would have been good

for the economy. maybe it would have spurred growth and done a lot of things, but congress doesn't act on that kind of suggestion, on it would be good. congress does major tax reform, that includes adding new taxes only when they have to, not when they should. there's never been a have to that produced a consumption tax. >> you know, i think in the public perception, we have a website where we asked people to send in their tax reform comments, and i'm fascinated, the various comments say, well, what we have to do is rid of the income tax, replace with a sales tax, and get rid of the irs. you think, well, wait, who do you think is going to collect that sales tax. there's not a line from the cash register to the public fisk or something. it's a real miscomprehension about the operations. the perception of the sales tax or consumption tax is that it will be easy to administer, you

know, there is a role for the tax collector there, and if you look at any state law, you will see the carveout of the exemptions, and they are as complex as some of the tax preferences in our code too. it's required on consumption tax. >> can i add to the story too? that's the nature of accounting systems and how they influence the development of tax policy. back to the history of conversion from tariff to app income tax, what makes this possible is the growth of the modern corporation, the modern large business because they develop the accounting systems that track who got wages, who got what, and, in fact, to operate officially, they have to keep track it of. the financial accounting requires them to track income. it's the government that latching on the accounting systems and really relies op them to enforce the code. in truth, it's really the large business, large chart, whatever, the larger obama administration

is really the main strurmt for implementing a tax system, whatever you have. they are the ones that keep most of the records, and they are also the ones that, if they are large enough, they can do what the smaller organization does, keeping two sets of books. the financial accounting would be messed up, they could allocate capital well. that's part of the reason why income tax is possible in the 20th century, and despite the fact the civil war, it doesn't work in a nation of farmers or small businesses. in the modern era, there's another story missing, and that is which relates to something everybody's talked a limit about, about transfer systems interacting with the tax code. nina talked about the income cax credit, joe talked about it, and if you think about what we do in terms of phasing out benefits in the tax system and phasing out, measuring who is eligible for the huge number of the transfer systems, we rely on income. we are not going to rely on consumption and say there's a

million dollars in income, but you consumed 10,000. we'll geoff -- give you welfare paymentsment -- payments. the notion that we can abandon income accounting and purify the tax system and the heavy transfer systems here that no longer have the income accounting will not work. by the way, here's what the exbl care agent because they think of it as health reform and tax reform all at once because there's a new tax system on income imposed on people getting the subsidy. another dollar of income. they got to lose at nine cents of the health benefit to be implemented. the notion that you can convert to a consumption tax and not worry about the accounting issues, i think is somewhat of a miss. >> straight out of joe's book, i was struck in 1937, franklin roosevelt said the following.

if congress passes the tax act in good faith and they come along through the way of high priced lawyers discovered a loophole, is that the moral thing to do or not even if it is the legal thing? that's the big question. since 1937, and joe can tell us long before that, politicians have been talking about loophole closings as not just a valuable financial step, but, also, as a moral question, and now we're in the middle of having the same argument again about closing loopholes. i want to ask the panelists about the issue of loophole closing. how important is to to real tax reform in terms of fairness and efficiency. eric, you want to start? >> okay. you used the word "loophole," a charged word. >> absolutely. let's say loophole of broad p -- >> if i don't care lieu accounting systems the tax expenditure -- if you look at the expendtures,

the exemption of mortgage interest deductions, health care, irsa and 401(k)s and the big numbers come from, i don't think most people think of those things as loopholes. thee -- these are policy choices we made, may be the wrong choices, but nonetheless, they are not loopholes, and i don't think that is what fdr had in mind making that statement. now, there's obviously loopholes. we talked about carried interest, whether that should be capital gain or ordinary income, and, you know, many others that can be identified, and i think that, certainly, there is something that is for the sake proceeds fairness, economic equity, and so forth that we should go after. i don't think that's disputable. i think it's just probably unfortunate that people think you can do that and really solve

the budget problem. >> joe? >> you know, i think the loophole debate changes a lot after world war ii because before the tax, the mass tax, every loophole belongs to a rich person and not to a regular person. it's easy to demonize every preference before the war changes the tax. it's not progressive. it is to the benefit of lucky, wealthy people. that changes after the war when the loopholes become our, and, suddenly, we don't think of them as loopholes anymore. it's my earned right to buy a house and have the government subsidize it. i think that changes a lot. what has not changed is that prodding out malifactors has been a key tool in mass politics, so, you know, in the early 1930s, they bring wall street guys to testify on capitol hill because they were not paying income taxes because they took huge losses when the

market crashed, but they said, look, they are not paying taxes in the middle of the depression, we're all suffering. that's intolerable, and there's a lot of changes enacted into the tax system. politicians are usually savvy about exploiting loopholes to get the kind of tax reforms they want. i think that goes on now. you know, loopholes is just another word for other person's tax preferences, but i think that it is a powerful way of talking about it, and i mean, where i work, we are not allowed to use the word "loophole" because it distorts the whole thing implying there's an accident, which, of course, they are not accidents, most of them, they are deliberate insertions into the tax law, but i think we need to grapple with the concept because americans, certainly, they have -- certainly colors their idea how well the tax system is working, and to some degree, it's really destructive for the vitality and the survival of the tax system. when people lose faith, that the

system is horizontally equitable and verticallyic witble because loopholes erode both axis, they can lose faith in the whole system, and that's a problem. >> gene, economists always talk about broadening the base, lowering the rate, politicians end up narrowing the base and raising the rate. what is going on here? do you see this environment changing in any sort of fundamental way? >> well, i think what gets confused in the discussion on loopholes or tax expenditures is that there's two issues. one is do you want the particular subsidy or spending-like item that you've got, and, second, do you want it in the tax code? actually, that's the third issue, the tax code in a budget sense, and do you want the tie rapts to administer it?

first issue, whether you want to the provision seems to me is the same issue you got with direct spending items. doo i want to subsidize wanes? that's earned income tax credit, and this is one item i favor. i favor weighed sub subsidies aw income level with income distribution. i don't like the budget accounting for it because it feels like it's a tax cut when it's an expenditure. it makes it easier to enact that way. it has the same effect as direct expenditure. it's a rare exception of the tax code i don't want irs to administer it, but for weight subsidies, the fact that employers issue w 2s, i think they can administer. separate the issues. there is a story, and this largely relates to the budget accounting con cement that a tax cut looks like a negative tax, and, therefore, it is, you know, it's not the same thing -- appears to be smaller government

when it's larger government. the story has to do with a little scene, and i was not there, so this is secondhand, but at least one of the friends, ben berman, the deputy assistant secretary in treasury at -- in the clinton administration, tells the story about going and meeting up with larry summers. the administration wanted money to subsidize school construction. if anything sounds like an expenditure item, it's financing school construction. the issue was that the tax people said, you know, we should have a tax code, and he said it's the only way to get it. they jiggered a fancy school construction bond that was in design of a credit with a deduction, and all of this starts to make the tax cut rather than a spending in connection with to get it through congress that way. ..

the kind of analysis that gene is saying and put everything on the table. i think what he is really -- my

personal daunt dot sort of mission is to try to get taxpayers to understand what is really happening to them in the code. so few taxpayers can answer the question what is my marginal rate to my son to read from the average rate. they have no idea. they buy this idea that if you put up phase out in here, that is different, not raising rates when, in fact, it is creating a much higher rate. that lack of transparency badges makes the code so top-heavy that is going to ultimately fall in of itself. we are really spending a lot of time now thinking about in line organization held to communicate directly with taxpayers through social media and get them more

aware of what the tax system is doing because i have sort of given up in despair that we will have anything other than a political debate going to that great issue with the size of government issued. so what i want to do is get the taxpayers to start saying, wait. this makes no sense. less talk about this. as i say, what else have i got to do? >> i will turn this over to you for questions, but i want to ask one more bottom-line question. we can go down the panelists here. do you think that the income tax , as currently designed, can generate the revenue we need to pay for the government we seem to want? do you want to start? >> i'm going to rephrase that a little bit. if you're asking every are out to see major tax changes coming down the road in the form of

fundamental reform or some sort of major addition to this tax system, i am not optimistic for the foreseeable future that we're going to see any of that. i don't -- right now what history teaches me is this depressing lesson that tax reform is hard and infrequent and only happens when it has to, and i just don't know that there is an imperative right now were quite yet. we do need a lot of money at some point. merrick -- unless americans are willing to scale back the size of government to a degree of their venture in the interest in doing that is an abstract problem. pro enough for a long time and don't think the congress will act until as too late. so i think down the road ice charles's is just as has some sort of broad based assumption

tax. something will pushes over that that is a really doesn't like the head. >> in the income tax as it is support the government as it is? >> i think the income tax to support government at its current levels. the issue about going to value added tax may have raised a bunch of other reasons why you might want to do it. licenses, as an add-on commander talking about raising revenue, not thinking about converting to eight income tax or consumption based income-tax a letter ten percentage points which is never where you start. i say that that we looked at it in treasury. we could include another few thousand personnel.

you don't want to do it at a low rate. that much administrative cost to the system, it would be better to go after a lot of these the ones that are very popular with the public which could go a long way. there is another issue. we are talking about taxes sitting over here in duplicity to your question is what is happening to the size of government because to me the tax burden to the public is exactly equal to a spending burden. we mislead them when we say taxes are $100 in spending is a wonder and 20. it is 120 that we have left to future generations to pay. the tax burden is equal to a spending burden. if that keeps showing a because we don't take control of the spending will schedule to have a third of adults in social security. that is one of our support systems. with that about 20 years the health costs are out of control. certainly the more we go in that direction the more the taxes are going to have to eventually support that structure. we cannot get there is all that

by running deficits. as long as taxes catch up the spending that they will have to go to a consumption type of tax. if we get some of this growth under control and moderate i think you could live with an income tax with a reward and cut back on the spending in the tax cut. i don't know. >> well, i have a short answer. no. but i do want to say something. there are, you know, a lot of ways that the tax system could be made simpler. a lot of gratuitous and unnecessary complexity of the tax system. given the stalemate in politics this is really a very good time to let those issues, which

really should be non-partisan and that the leaders on that should be coming from the tax-writing committee for the house. the staff and the members. i have reason to believe that it might be starting in that direction to end i think there are a lot of good ideas. [laughter] >> a shot up to dave. the committee has begun to propose some of this. you get the last word on this. can the income tax support the government? >> when you say that you are obviously assuming that the ira's and collect whatever the income tax laws are saying should be paid. that is. you know, was echoed as complex -- the complexity is not so much what might be required because of the complex business environment or an individual's environment but because of how it is grown up of layers upon layers of permutation and exemptions and exceptions and

exceptions to the exemptions into the rules. that is an impossible thing to administer fairly and well instead of like the accounts receivable function that it is. funded at the level it is to be funded at. we have never been there. and so in that way i have real concern about but, you know, how we're going to go forward in the future and that taxpayers will be treated in the future, and i see that it is an endless cycle until finally we but the bullet and say we're at the crisis point. we do have to do this fundamental comprehensive structural tax reform which can include a consumption tax. but doing a consumption tax on top of the existing income tax would be a disaster.

>> let me give you a chance to have some questions. for those of you watching on c-span and those of you watching on the web, you need to do to get a question is the mayor led to public affairs. all one word. let's start here. i ask you all the way for the microphone. please introduce ourselves and make your question a question. to the gentleman in the back. >> yes. is there any evidence that the steep reduction, the top marginal tax rate has reduced the propensity of high income taxpayers to evade or avoid taxes? >> that sounds like one for you. >> actually, evasion is constant throughout. throughout the history of the internal revenue code. and i think that the thing that

makes someone want to evade tax are multiple. being able to isolate out any one factor is very, very difficult. i think that you can do a psychological profile of the people who are the very, very affluent and the very, very rich, and it may as much be that they view any kind of constraints as a game. whether it is the tax system and the rate, the top rate being that constraint for something else being a constraint, they are going to work against that. i really can't answer that question. i -- maybe joe has a different perspective or eric. a think it is very complex. >> i had an observation. the with evasion, but avoidance. but since the 1970's and '60's are we had very high marginal rates, they go lower.

the reported distribution of income has become all lot less equal. and i am unsure -- we don't know exactly what the cause and effect is. amateur it is totally unrelated. because one thing that might -- a corporate executive. a more of your compensation in the form of salary and bonuses and big offices, that sort of encourages the enables the tax rates being lowered. when they are high people try to figure out all kinds of ways to structure their life so that they -- so that things are not taxable. >> to footnotes there. it is fairly clear that when you lower the tax rate on capital gains people to realize more of those gains, which is what eric is partly pointing to when he says, we seem to have more recognition of income and higher income levels. a greater -- and the unequal distribution of income in general, but some of that on the

reporting side to answer more realization of gains. that argument, that tax cuts before themselves to a but we do lower the rating give more realization of gains. that is because it is partly simply because capital gains tax is a discretionary tax. the other foot know what to make is to the extent that you level of a lot of avoidance due to differentials. it is an extent that you tax items similarly, for instance, capital gains is taxed at the same rate as labour income, you have no incentive to share from capital gains delivering come. so in those types of cases, if you level the differences between taxes you can remove at least some. and that in some cases. >> that's fair. >> of the questions? >> this seems to me that the biggest barrier to tax policy,

legislative tax policy changes is the view held by one of our political parties that all tax expenditures harper said morally justified as allowing taxpayers to keep their own money and that they automatically shrink the size of the state which is perce good for both moral and economic reasons and that doing the same identical fibbing through the budget is immoral and wrong because it increases the size of the state. so i am wondering whether the panel has any way that they know of in their own personal experience to explain to people that that tax expenditure, at least many of them, are simply spending. >> you know, i just have to say, i think that everyone on the hill understands that.

i think what they say to their constituents and what makes sense politically is what you're saying. appealing to other concerns that people have when you're taxing in the way you are. i think that, you know, going up there and explaining to someone on the hill that this is what it is, i just did not when i talk about tax expenditures versus direct spending. everybody i talked to understands that. >> can i ask you about the history of this. how did this happen? >> what i think has really changed jerba, there used to be a bipartisan consensus about what constituted a tax reform. and it involved generally speaking the reduction in tax expenditures or tax preferences of any kind. and it truly was bipartisan. that is not to say that there were not people out there protecting every, you know, popular deduction in every era,

but at least the ones sitting on the tax-writing committees in congress and in the broader tax community, it was very clear that if we could trade lower rates are broader base that was a pretty good deal. i think that that consensus has broken down and that the assumption now does that the broadening the base element of the traditional tax reform equation has lost support, particularly from republicans. but it complicates the whole process of tax law making. and i think it makes traditional tax reform much less likely because back then back in the bering door there were problems with the sort of tax reform. there was at least an agreement that this would be a good sort of tax reform. i've been many members of congress would simply reject that idea out of hand. >> i can give a partial historical explanation.

if you think back in the broad history of taxation, until the very modern era taxation was about supporting public goods, highways and police and fire protection and defense particularly. and in that world there were the ways and means committees of worry about how you pay for these things and the public good of the committees that deal with what we're pulling with spending . once government transformed itself to a government of making transfers it changes the equation enormously because once we are in the transfers we're not giving things to individuals, often of an individual basis. health insurance, social security, welfare check, earned income credit. in that world there's a lot more give away. the distinction between what is a tax and the transfer. to an economist attacks is a negative transfer and the transfer is a negative tax. just in terms of the politics the ways and means committee says, the spending committees are giving this money away.

we don't want to be scrooge of the time. we want to play santa claus. and this division. if you think about this division between the tax ways and means committee's in the spending committees to do there sense of transfers from create a dynamic bill of about what to do it. we both thought to be sent across. we actually have not even solve our jurisdiction problem and it was to the elected officials can give away the most. >> i have been trying to explain the point for the last 30 years. if you can they give a better way to do it. >> one of the things we have been thinking about doing, this goes back to my quiz on request or whatever, there is a taxpayer received on the white house website we're thinking about

building a robust thank. here are some of the giveaways that you have. this amount of income was not taxed. if you add that here is where your overall rate is. a little bit of a reality check. and making it more real to individual taxpayers at that point in time. i just feel like doing things like maybe we can change the debate a little bit. people will no longer be willing to just accept some of the statements coming out at face value. retirement savings are not being taxed. what i put into retirement. that is income, but it is now being taxed. the don't have to think about that. >> time for one more question from the audience. >> the microphone. >> my name is live on fisher. does anyone on the panel have an opinion of whether or not

restructuring or removing of the face of limitation for the student loan interest deduction will have any impact or effect on minimizing the impact of eliminating the student loan debt crisis? >> anybody? >> not removing or restructuring the phase of limitations for the student loan interest deduction, which i think probably phases out at 55,000 for a single individual, whether or not the impact, whether in a restructuring that or removing the facilitations will have an effect on minimizing the looming student loan debt crisis that we face? seventy people are going back to grant school to get jobs and incurring more and stallone that. >> any thoughts on that specifically? may be more generally this issue of face up to standard and interesting one. do you want to tackle that? the perverse effects of the hundreds of phases?

>> income tax. i earn another dollar and lose $0.10 a minute health benefits. a lot of the same simplifications of the tax code. but in 84 writing these tax expenditures, this does not belong in the tax cut. a tax expenditure and therefore we should eliminate it. you actually cannot say that. if he think about the trade of the your love with in the ways and means committee with in the tax cut you can trade off the tax expenditure for a lower rate fell another tax expenditure. you cannot trade of the tax expenditure for a direct expenditure. probably stretching a little beyond your question. this soon might be the question of whether we judge to do any of this in the tax system. it's very hard to think about reforms where you can trade off

spending for indirect spending which gives to bruces question as well. all these phase out coming. actually if you want to in the spending the system, the committee's opinion phaseouts like tax systems. no some way or another this is a very broad question. we have to figure out ways to do these budget issues and a more combined way across the tax expenditures to a direct spending adams. so far we don't have that jurisdiction set up to do that within congress. >> okay. we are about -- did you want to say something? about of time. thank you all very much for coming. i want to remind you all, taxing the rich and the age of fdr. you can get it. brand new. it is related. i read it over the weekend. thank you all for coming. [applause]

[inaudible conversations] >> defense secretary leon panetta testified in front of the senate armed services committee. here is a couple minutes of hearing. >> on that tragic day, as always, the department of defense was prepared for a wide range of contingencies. just to remind you that in ctc in the six months prior to that attack identified some 281 threats to u.s. diplomats, diplomatic facilities, embassies

to ambassadors, and consulates worldwide. obviously been gauzy was one of those almost 300 areas of concern. unfortunately there was no specific intelligence are indications of an imminent -- intimate attack on the u.s. facilities in benghazi. frankly, without an adequate warning there was not enough time given the speed of the attack for armed military assets to respond. that is not just my view for general dempsey's you. it was the view of the accountability review board that studied. in the months since the tragedy in the temporary facility in the nearby and a seven gauzy we have learned to -- there were actually to short duration attacks that occurred some six

hours apart. again, there was no specific intelligence that indicated a second attack would occur at the amex some 2 miles away. the bottom line is this. there were not dealing with a prolonged or continuous gasol which could have been brought to an end by u.s. military spots. very simply we head forces deployed to the region. the lack of an adequate warning, events that move quickly on the ground prevented a more immediate response. >> part of today's hearing. in about 35 minutes from now at eight eastern we will show you the hearing in its entirety or you can watch any time on line at c-span.org. on our next washington journal

we will talk about the new u.s.-based news channel with its executive producer bob wedlock. kristine romero, the special inspector general for the trouble was a relief program will take questions about her criticism of the treasury department for approving excessive pay for executives at firms that receive taxpayer funded bailout starring a financial crisis. and we will discuss a report to conclude that on average americans die center and have higher rates of disease than people living in other high-income countries. dr. stephen wolfe, director of the virginia commonwealth university's center. washington journal is live on c-span every day at 7:00 a.m. eastern. >> having observed the steady improvement in the opportunities and well-being of our citizens, i can report to you that the

state of this old but youthful union is good. >> i have come to report to you instead of the union. america is much improved. there is good reason to believe that improvement will continue. >> my duty tonight is to report on the state of the union, not the state of our government, but of our american community and to set forth our responsibilities and the words of our founders to form a more perfect union. the state of the union thecitize strong. ton >> as we gathered tonight our i nation is at war. our economy is in recession, ans the civilized world faces unprecedented dangers.io and yet the state of our union has never beenwo stronger.ater, [applause] >> is because of our people that our future is helpful, our

journey goes toward, and the state of our unions formed. >> tuesday president obamaemains delivers this year's address live on c-span with our preview program starting at 8:00 p.m. eastern and the president at nine followed by the gope response and your reaction.ful,o the state of turhe union tuesday night on c-span, c-span radio, and c-span.org. >> british prime minister david cameron to questions yesterday for members in the house of commons during his weekly question time session. from london, this is 35 minutes. >> the prime minister.ister mr. christopher coates. [inaudible conversations] >> thank you, mr. speaker.. spee this morning at minute -- mini meetings with ministerial colleagues and others. i shall have further suchl meetings later today such meetir today. >> in thanking my right

honorable friend for the answer, and in having given my right honorable friend notice of my question which you may find particularly useful in the sense of its fair and transparent, and it's also very modern, cannot right honorable friend say that in response to the many concerns expressed in yesterday's debate will be ensure that civil partnerships are open to heterosexual couples on an equal basis with homosexual couples? >> i'm very grateful to my honorable friend, and also for giving me notice of his question. i listen carefully to what he says but, frankly, i'm a marriage man. i'm a great supporter of marriage. i want to promote marriage, defend marriage, encourage marriage. in the great thing about last night's vote is that today people who love each other will now be able to get married and i think that's important advance. i think we should be promoting marriage rather than looking at any other way of weakening it. >> ed miliband. [shouting]

>> mr. speaker, i want to ask the prime minister about the bedroom back. allison has 18 year-old twin sons were both in the army. the prime ministers bedroom packed means well her sons are away, she would charge more for the bedroom? she says i resent the fact that both my sons are serving and protecting their country had been returned will not have a home to come home to when the granted a much-needed leave. what is the prime minister's answer? >> first of all, let me make clear, this is not a tax. this is a benefit. and i would make two points. i would make two points in respect to this specific case that he raises. first of all, all the time and labour was in government, if you were in a private sector rented home and you in receipt of housing benefits, you did not get any benefit for empty rooms but i think that is important. so it is only fai that we treat

people in social housing the same way. the second point i'd make is that anyone is away from home, and, obviously, the earnings are not counted and, therefore, the benefits of that person are likely to go up. >> ed miliband. >> mr. speaker, i look forward to them explaining to allison why her paying 25 pounds a week more from april is not a tax on her. [shouting] >> and as for his point, and as for his point about the private renters have to, i think he misunderstands the point of social housing. after this purpose, part of this purpose is to protect the most vulnerable. and according to the governments own figures, and according to the governments own figures, two-thirds of the people hit are disabled. let me tell the prime minister about an e-mail i received last week. it says my wife is disabled, has a degenerative condition and is therefore in bed. the gentleman goes on, due to illness, l. medical condition, i usually sleep in the spare

bedroom. why is it fair for him and hundreds of thousands of others of disabled people like him to be hit by the bedroom attacks? >> first of all as with every honorable member, if he wants me or the department of working pensions to look at a specific case, of course i will. let me again make some detailed points to him. first of all, it is a 15 million pounds fund to deal with difficult cases. but let me also make the basic argument of fairness that he seems to miss. if you are in private rented housing and received no housing benefit, you don't get money for an extra room. if you are in private housing and to get housing benefit, you don't get money for an extra room. so there's a basic argument of fairness. why should we be doing more for people on social housing benefit and people in private housing on housing benefit? and there's one additional point that frankly, thank you he has

got to engaging. the housing benefit bill is now 23 billion pounds a year. now, we know that he is against capping welfare. we know he is against restricting welfare for below the rate of increase in wages. we know all the things he is against. we are beginning to wonder what on earth he is for. >> he is spending more than 8 billion pounds more than he planned on housing benefit because his economic failure during this time. and i just say to him, the whole point of social housing is to protect families, including the disabled. now, it doesn't sound like he's going to do anything for military families or the disabled, but let's talk about a group of people he is moved by. i have here a letter sent on his behalf by the conservative party treasurer about the so-called mansion tax, and it says this. we promise that no tax will be

introduced during the course of this parliament. and it goes on, to keep a taxman out of your home, please help by donating today and supporting the no home tax campaign. can the prime minister explain what is it about the plight of those people he finds so much more compelling than those hit by the bedroom tax? >> it is in favor of a mansion tax. why didn't he introduce one in the 13 years in government? if you so passionate about social housing in why didn't he build any when he was in government? and if he thinks that we're spending too much on housing benefit, ma he just said the bill is going up, why did he oppose each and every attempt we make to get the welfare bill under control? the fact is the public can see we are on the side of people who work hard and want to do the right thing. all he can ever do is spend more money.

>> i do say to the prime minister he shouldn't get so heads up. i mean, after all, after all he's got nearly half his parliamentary party behind him. [laughter] now, now, now the policy, now the policy, mr. speaker, the policy isn't just unfair. it's not going to work either. 4700 people are going to be hit by the bedroom tax. there are just 73 council properties for them to move to. can the prime minister explain how exactly that's going to work? >> what this government is doing is actually building more houses and controlling welfare bills. but, frankly, the question is one that he has won to do. if he opposes the welfare kept him if he opposes restrictions on increased welfare, if he opposes reform of disability benefits, if he opposes each and

every welfare change we make, how on earth is he going to get control of spending? >> ed miliband. >> for clues in the title, prime minister's question. is supposed to try to answer the question. i saw what he might say. clearly doesn't understand. what h device is moved to the private rented sector because there are not enough private counsel for people. but this is where, but this is where -- [shouting] but this is where, i like when he gets up to say what those people should do. but the policy is supposed to save money, and this is where it's not going to work out. another woman who wrote to me, diane, says my rent for my family home -- [shouting] >> i don't -- i don't know why they're groaning, mr. speaker. there are thousands of their constituents will be hit by this. another woman who wrote to me,

diane, says adequate, my rent for my family home is up present 65 pounds 68. we are the one bedroom and the private sector would cost over 100 pounds. thank you how can it possibly make sense to force people into a situation where it costs the state more not less by moving to the private rented sector? >> what this government is doing is building more homes. if he supports that, will he now support our changes to the planning system? will he support the new homes bonus? will he support the things that will get more homes build and get more people into jobs? because of course with 1 million extra people working in the private sector. that is what he is got to engaging. he's got absolutely no suggestion for how to get on top of welfare, get our deficit down, get our economy moving, or frankly do anything else. >> ed miliband. >> so today we discover he hasn't even got a clue about his own policy that he is introduced

here and his answers today remind us what his party and the country are saying about him. the only people are a small group of rich and powerful people. that's what he is come up a policy that is unworkable and unfair. is a prime minister who is weak, incompetent, and totally out of touch. >> totally pathetic rubbish that we get used to every wednesday. and on the issue, on the issue of who listens to do, i have a very clear idea of who he listens to. because we heard in the al as he lecture by le lynn mccluskey. and len mccluskey said this. he says i met ed miliband and he asked me this question that this is the question he asked him. lynn, if you had three wishes, three things you would like us to do, if we got back into power, what would you like them to be? and len mccluskey's answer, trade union, freedom, trade

union, freedom, trade union, freedom. that is who he wants to be the fairy godmother to. >> here, here. >> at the time of the strategic defense security review, two and half years ago, my right honorable friend said my own strong view is that the structure will require year on year real terms growth in the defense budget in the years beyond 2015. does that remain his view, and has he heard any similar view expressed by the leader of the opposition? >> it does remain my view but i'm afraid to say as far as i can say i am the only party leader who believes that in the years beyond this parliament we should be increasing defense spending in the way that he says it. but the good news is, for all those who care about this issue, that it is agreed government

policy that the defense equipment program does need real terms increases up to, after 2015. and that's are important for us to be able to plan the exception of equipment program that we have that is going to give us some of the best equipped armed forces anywhere in the world. >> mr. speaker, the budget for office responsibility, the office for budget responsibility rather, tells us it's the bankers will pay 500 million pounds less for the bankers. the prime minister promised last year, yet again in april he reflects a 500 million pounds cut in the poorest to the second empty bedroom tax. how can he justify taking from the poor and giving to the rich? >> it's an important point which was we have introduced the bank levy. we think there's a better answer than one off bonus tax.

of course, the bank levy will be paid every year. so it will raise considerably more than a one off a bonus tax. what my right honorable friend has done when the bank levy hasn't come up to the figures that we require is likely to increase the bank levy to make sure that it does. >> sir james pays. >> kincan i remind the house ofy declared interest. to martha prime minister will go quite rightly too argued for a substantial reduction in funding. will he ensure that any reductions the does apply to farmers right across europe and not just in the uk? would also make sure that he doesn't fall into the trap made by a fallen into by his predecessor in 2005 last time round so when pressing for cuts in the with the cut to the one part that everybody thinks is worthwhile, which is cuts to the road of a program and the environment? >> spend my right honorable friend speaks very knowledgeably about this but these are going to be extremely difficult

negotiations, and, obviously, our aim as i said this was a significant cut that is spoken about. i think the point he makes about agriculture is important. particularly about the flexibility that we require to make sure things like the rural develop a program can continue to succeed. >> we know the prime minister has met lots of millionaires, but has he ever met anyone who will lose their home because of his bedroom tax? >> i hold constituency hearings and i listened all the cases that lead of the opposition has today. i have are a of price norse -- in my constituents aren't many families living in my constituency. but what they said to me as they want a government that is on the side people who work hard and do the right thing. and they support the fact that we are capping welfare, we're getting on top of immigration, cleaning up the mess left by her party. >> thank you, mr. speaker. today is the united nations international day on

zero-tolerance for mutilation. does the transcript we would be that britain should be doing all it can to combat this dreadful abuse of the human rights, women and girls, overseas than here in the uk? >> here, here. >> i completely agree with honorable lady and she's right to raise this. the government has made some progress on this appalling them looking right across, over would you overseas in terms of our aid program and trying to prevent the horrific female genital mutilation. but also to make sure here that the crown prosecution service and others are aware of the law and do everything they can to make sure it's properly prosecuted. >> michael mccann. >> thank you, mr. speaker. can the prime minister confirm that our courts have cleared -- [inaudible] [laughter] >> that is not, that is not a constituency case that's come my way. [laughter] but all i can say is i hope it's

going to gender a great host of understanding of these events amongst all our people and i hope that it will be a great boost to the great city of lester. >> thank you, mr. speaker. this week announced the work of the services is moving to newcastle, is the latest in a long series of similar announcements affecting the valley, including the closure of our office by the previous government. will the prime minister looked to bring extra work to the office in stock and moving another public sector agency to the east valley? >> i will look very carefully of what my honorable friend says but what i would say is of course we want to make sure that public sector jobs are fairly distributed around the country but we have to be frank, the real need for our economy is a rebalancing with growth and the private sector to make up for the fact that public sector jobs have declined. it should be looked over the last two and half years the

million extra private sector jobs has more than offset the decline in private sector, -- in public sector unemployment and that's why we concede unemployment falling around the country. >> the prime minister may not be aware of the opinion poll by the bbc in northern ireland which shows all of the six counties of northern ireland there is now a clear majority in favor of the union because people right across northern ireland recognize that when it comes to being part of this united kingdom, we are better off together. i sometimes try to avoid opinion polls i haven't seen that one. but it looks like one that is, will lift the spirits of almost everyone in this house. because we believe in the united kingdom, and we believe in northern ireland being part of the united kingdom. >> can the prime minister reassure this house that he still believes in increasing spending on the nhs, making sure that those funds go to the front

lines doctors and nurses to the frontline of our services to a concert to give my honorable friend that assurance but that is what we committed to increase nhs spending during this parliament for each year in this parliament and we are on course to do that. crucially we do want to make sure the money goes to frontline and that is why the number of managers and of administrators in our nhs is right down, and the number of clinical staff is right up. >> thank you, mr. speaker. was at the double dip recession, the soda and deficit reduction of the projected 60% increase in national debt over the next five years that led prime minister -- full confidence in his chancellor? >> i have confidence in the chance or. the deficit is down 25%. there are a million extra private sector jobs and we are cleaning up made by the party opposite. >> [inaudible] building a new hospital in which local hospital

services were decimated. can i, too, say -- [inaudible] >> i think on this day particularly when we are about to discuss what happened at the hospital, i think it is a day to talk about the importance of care and their health care service, the importance of the frontline, and importance above all of are looking at quality and listening to patients. so under this government of course resources have been constrained for all the reasons we discussed across, weekend we got but we did make a conscious choice to put more money into the nhs and to get that to the frontline. that is why there are 5900 more doctors and there are 19,000 fewer nonclinical staff. the money is going into the frontline but the focus needs to be on the quality and the patients. >> can ask the prime minister if he shares this parties concerned, and -- will he assure

me and as part of the government support to raise awareness of issues and work with the administrations across to tackle the scourge across great britain and northern ireland? >> first of all can i commend the honorable gentleman and the democratic unions for bringing this motion forward, bringing this issue forward. the whole issue of suicide is one that we often don't talk enough about, address enough about in our society come in a country and i think it's right to do so. it's a shocking statistic that in northern ireland almost six times the number of people killed in road traffic accidents are lost to suicide or to raising awareness to this in making sure there's a proper cross government strategy to help people deal with this is vitally important and they are right to raise up. >> as a result of the financial mess the labour government left the country, -- [shouting]

>> local council -- spins order your calm down. we have a lot of questions to get too. i intend to get through them. let's have a bit of order for mr. john leech spill the local council has faced a budget settlement as most of the government departments but so does the prime minister share my dismay that the council is choosing to close -- [inaudible] to while at the same time have spent hundreds of thousands of pounds on an alicia key concert and leaves 109 reserves sitting in the back? >> my honorable friend makes an important point. of course, councils face difficult spending decisions, but if you look at the level of spending and the level of grothus in many cases it's going to what they would getting under the less government. obviously, the economy has declined since then, so we have to cut our cloth accordingly but they should be held accountable

for the decision that they may pick and in some cases there can be little doubt that councils are making high profile cuts to try to make a point, and they shouldn't be damaging people's livelihood. they should be doing the best for their cities. >> will be prime minister confirm for the record that thanks to his cuts to the charter on of the working tax credit families and children are losing up to 1500 pounds a year? >> what has happened under the tile -- child tax credit is we've increased by 390 pounds in the early budgets of this government. and if you look at the benefits for a two parent to child family, they would be getting over 1500 pounds, and extra this year, 30 pounds a week, compared to 2010. so i'm afraid the honorable gentleman is wrong. >> will be prime minister a tribute to the new president of somalia whose government has made remarkable progress over

the last few months? they still have a long way to go. will he agree that the somali piece process is a really good example of britain combining aid and development with energizing the neighboring states and the diplomatic committee worldwide? can he tell the house what role does he envision for the somalians here in the uk speak as i think my honorable friend makes a very good point. and anyone wanting to the relevance of somalia to here in the uk, we have to remember that this country has been the author of huge amounts of problems from terrorism, piracy, mass migration, and even to the most argued a skeptic of our aid budget i would say this is a really good case. whercase. where engagement come at them and diplomacy can help the country to mend itself for the future. in terms of the ds for i hope they will give civil -- full support of the new president who is damaging huge group in this country at many of the problems that have doubled of that country for so long. >> prime minister's career

probably heat when he was a backbench member of the affairs committee in 2005. could he revive his progressive courage of that time when he looks at the report from the all party group about the awful problem of new grants that are on the market but are not controlled in any way? >> well, i'm afraid of the honorable gentleman's feels my career trajectory, and i won't ask you about his -- [laughter] will have an agreement about it afterward but i think that report that i worked on i did learn some important lessons from that, which is i think the priority we should do in terms of attacking drugs, and education and treatment i think those are the obsolete to key arms would need to be done but it don't believe we should be legalizing any drugs that are currently illegal. and in terms of current legal height, and, indeed, problems relating to the last special

election like cacti i think we need to look for every catholic of evidence that what will work best. >> over 80,000 people have benefited from our policy of raising the threshold. and this morning the iss confirmed that this policy is right, and those who have the broadest shoulders are burying the greatest burden of tax. in light of this, will the government commit to raising the threshold of the people who pay taxes to 10,000 pounds in this budget? >> can i think the honorable lady for what she said. she's absolute right, which is raising the threshold for which people start to pay tax i think has been absolutely right. what man is someone on minimum wage working full-time, their tax bill has been cut by one

half and i think it is a huge change to help people who work hard, want to do the right thing, and it's the this government that is reporting them. she mentions the green budget at this point. i haven't had that much time to study about one thing did stand out which is on the issue of fairness it's as this, the whole set of tax and benefit changes introduced between the start of 2010 and 2015-16 to hit the richest households hardest. this government is fair but it is helping the hardest working. >> the leader of opposition asked the prime minister a very simple question to which he gave no adequate reply, so i will ask it again. what is the difference between a bedroom tax and disabled and the mansion tax? >> i don't accept that the bedroom tax is a tax but it is an issue about benefit on the fact is as a country we're spending 23 billion pounds on housing benefit. now, we have to have a debate in

this country, and the last government said would have to have a debate in this country about getting on top of housing benefit. indeed, it's featured in the labour manifesto. the manifesto on which they were all elected. since they've moved to the opposition benches they have given up all sense of that responsibility at all. >> can the prime minister reconcile his recent comments on the need to accelerate major infrastructure projects for the government's decision to postpone a policy on airports until after the next election? will be reconsidered and bring that review forward? >> i will listen very careful to what my girlfriend said. i think you'll find if you looks at what and how davis said in terms of his review, he said this is a very propagated issue that merits proper examination that will take time. we need is a country to make major decisions about airport and airport capacity. we should be aiming as far as is possible to try to make these

decisions on a cross party basis, and i hope that our davis report will help that to happen. >> last night, trying to last night's vote on same-sex marriage is widely regarded as a historic vote. does the prime minister agree with me it's a tribute to all the people in all parties and no party, behind the scenes and in public who have worked for such equality? and does the prime minister agree with me that the vote proves that the heart is bending slowly but it bends towards justice? >> i agree very much with the honorable lady. i think the last night's vote will be seen not just as making sure there is a proper element of equality but also helping us to build a stronger and fair society. i thought many of the speeches made last night were very moving, very emotional and i

would pay tribute to all those people who actually made this case, some of them for many, many years, saying that they want their love to count the same way that a man and woman's love for each other counts. that is what we have open out in this country and that is why i'm proud that it is at this government that is brought it forward. >> four years, young people have -- [inaudible] this is now becoming critical. can the prime minister look closely at notches the authorities that specifically the low level of people -- [inaudible] >> i will look closely at what my honorable friend has said. i would make a couple of points. one is that within the education budget we have prioritized the per pupil funding so that has been a reduction in per pupil funding because i think it's very important schools can see forward to future years, the

source -- a source of budget they will have. the second thing we've done is obviously for the academy program is to encourage the devolution of more of the schools budget to the schools directly and i still think there's more that we can achieve on that agenda. >> mr. speaker, the prime minister said he would give the public a strong voice in the nhs. his former health secretary said he would have since of the nhs. why then -- [inaudible] rejected by the government last night? >> we do want to see patients have a stronger voice in the nhs and we are about to debate i think at some length some terms of the staff how that is done. i think one of the most important ways is going to be making sure that the mandates of the nhs commission board has at its heart quality nursing, or day care, and the voice of patients. we also need to look at how health watch is going to work to make sure it is truly independent and we have to understand that some of the ways

we have tried to empower patients in the past and the report we're about to discuss goes into this in some detail, some of the ways always with good intentions from governments on both sides of the house to give patients a better voice, we have to listen to what friends says when he says it hasn't worked. >> with more women in work than ever before, with more men in work than ever before, with more jobs created in the private sector, with the prime minister not agree with me that the chancellor's plan a is not only working with the economy is beginning to turn the corner? >> i'm grateful to my honorable friend. i think we should listen very carefully to what the governor of the bank of england said. we have said of course that growth is slower than we would like, but the economy is moving in the right direction. the rebalancing is taking place. the things that need to be fixed in our economy in terms of bank lending and housing supply, these things are being fixed. that's what this government is

determined to do. >> one of my constituents has learned that when the bedroom tax is introduced she will have 24 pounds a week to live on. she is so anxious about how she's going to manage. she is having cognitive behavior therapy. but her anxiety is totally understandable. does the prime minister agree with me that those who should be receiving the cognitive behavior therapy are the ones, namely his ministers, who think she could live on 24 pounds? >> i think the party opposite does have to address the fact that for 13 years in government they were perfectly content to have a housing benefit system for people who lived in private sector housing where there was no extra benefit for empty rooms. and i cannot understand why they count it unfair to have one rule fo